Pages

RSBL Gold Silver Bars/Coins

Showing posts with label dollar. Show all posts
Showing posts with label dollar. Show all posts

Thursday, 6 December 2018

Time to buy gold will arrive soon

So far this week looks good for gold as we saw its prices edging higher in Thursday In Asia and it traded near a 5 month high amid U.S. yield curve inversion.

The yield curve inversion triggered concerns about economic growth and a dollar sell-off recently. The two-year/10-year spread was at its flattest this week in more than a decade amid a sharp fall in long-term rates. A flatter curve is seen as an indicator of a slowing economy.


Any slower pace in the economy adds to negativity in growth. This has put pressure in the dollar and further strengthened gold prices. The greenback came under pressure last week when the market took comments from Fed chairman Jerome Powell as signalling a slower pace of rate hikes. Markets still expect the Fed to move forward with a quarter-point hike this month but have interpreted cautious remarks from policymakers to mean that further tightening in 2019 will have to be re-evaluated on economic and inflation data and hence the pull in prices has not been that high.

Furthermore, uncertainty prevails in the market over the upcoming Federal Reserve policy decision, as the Dec. 18-19 meeting looms just over the horizon.

On Wednesday gold hit a high of $1243 an ounce and plunge back to $1233. Though we have gold price moving up this year but the trading range has been sideways because it doesn’t stay at the peak for a long time.

Hence it has been containing most of the price especially since the 11th of October, between 1212 and 1243.  Gold bulls will need the Fed to halt its raising interest rate programme to see a major reversal in the price of gold. Once the Federal Reserve ends the tightening cycle, the time to buy gold will be near

So we can say that if the bulls keep running for gold then it will pick momentum from ere and will be seen crossing the $1243 territory and hopefully cross the July highs of $1257 an ounce.

The coming year looks positive for gold because the dollar is expected to weaken, US treasury yield might be lower, Chinese Yuan expected to recover and demand for jewellery predicted to rise.
And if all falls in place for the bulls then one wouldn’t be wrong if he expects gold to touch the $1400 level.




Monday, 3 December 2018

Will gold witness an upward trend soon

Gold was following a wave like movement during the week as we saw it moving up till Thursday and then diving down by the end of the week.
Gold edged higher for the second consecutive session on Thursday and was placed at the top end of its weekly trading range, around the $1227-28 region during the trading hours.

Spot gold has stood strong against a weaker dollar, with the precious metal’s spot price hovering at around $1228 – one of the highest levels it has seen since 11 November where it hit $1230 per ounce.

The Fed Chair Jerome Powell's comments that rates are just below the neutral level now triggered a broad-based US Dollar weakness and prompted some short-covering trade around the dollar-denominated commodity. This weakness further strengthened the yellow metal and pushed prices higher.



The USD bearish pressure now seems to have abated, though expectations of a slowdown in interest rate hikes, reinforced by sliding US Treasury bond yields, kept pushing the non-yielding yellow metal higher through the mid-European session on Thursday.

Even the prevalent positive mood around European equity markets, which tends to undermine demand for traditional safe-haven assets, did little to prompt any fresh selling around the precious metal or stall the ongoing positive momentum.

The price of gold shot up on Thursday, following Bank of England statement (on 28th November), in which the BoE forecast the UK economy’s performance in the face of the various Brexit outcomes and warned of serious economic contraction with any ‘No Deal’ Brexit.

But post the U.S. data released on Friday, the dollar which was lying flat, gained momentum. Reports released were above expectations and this strengthened the dollar thus pushing gold prices down.

Further, Gold prices fell in the domestic markets too. Investors took this dip as an opportunity to buy. The appreciating (Indian) rupee has brought down prices. At this price level, jewellers and retail buyers are quite comfortable in making purchases.

Local gold prices were trading near their lowest in about three months as an appreciation in the rupee made overseas buying cheaper. Physical gold demand in the world’s second biggest bullion consumer India got a fillip this week from a slide in local rates due to gains in the rupee, while buying was steady in other top Asian hubs.

Though gold hasn’t shown an eye catching gain, it still holds importance in the portfolio of many. If we see closely, gold has been falling since the past seven years. It’s down by more than a third over that period. So clearly, the metal is cheap and makes itself more appealing as a safe haven asset.

The precious metal has been in free fall most of 2018, losing roughly 11% of its value since its January peak. And this year's performance is a continuation of the longer-term trend.

Gold has slowly been trending higher since August. The metal is up a little more than 3% since then. And prices appear to be hitting what analysts describe as "higher lows."

Gold prices have been falling for years. Investors recently hit their most extreme negative sentiment levels in nearly two decades. And now, the price is starting to move back up.

With investors now pricing in only one more rate hike in 2019, markets feel positive for gold and hence it has once again found acceptance in an investment portfolio. Will we see gold in an upward trend soon? Well the answer lies in 2019 as 2018 is about to end and which a holiday mood in the air markets are not expected to be much volatile in the coming days.


Wednesday, 21 November 2018

Gold remains positive but lacks direction

Gold prices were modestly high last week reacting over a mixed bag of economic reports and geopolitical events. The yellow metal has been able to furnish gains over slightly weak US dollar.

GOLD PRICES rose against a falling US Dollar on Friday, halving last week's 1.9% drop to trade back above $1220 per ounce as Western stock markets fell and crude oil rallied from this month's 17% plunge so far.

Gold prices ended higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

Tumbling equities market, plunging oil prices, escalating worries about stresses in the global economy, ongoing trade tensions and uncertain growth projections have created a rally in gold prices. 



Let have look at these mixed bags -

BREXIT - The issues around Brexit have invigorated a little bit of safe-haven buying in the precious metals market. In the past week, U.K. Prime Minister Theresa May had two of her cabinet members resign Thursday, including her Brexit secretary, following May’s pronouncement Wednesday that she is sticking with her controversial Brexit plan. The British pound sunk on the news of the resignations, while European bond yields rose. Talks of a no confidence vote for May were also doing the rounds. This led to some safe haven buying in gold though it did not create that much an impact on the world marketplace.

DOLLAR - while the U.S. dollar remains the strongest and most consistent factor for gold, it’s likely that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favour. Furthermore, the marketplace took note of U.S. Federal Reserve Chairman Jerome Powell’s comments at a speech late Wednesday that the Fed is closely monitoring the modest deceleration in world economic growth. However, Powell implied that situation is not now altering the Fed’s monetary policy tenor of continuing to slowly raise U.S. interest rates. Powell added that a further U.S. stock market selloff could impact the Fed’s policy decisions. Any further weakness in the dollar due to Feds decisions will pull gold prices high.

EURO ZONE CRISIS - Crisis and uncertainty continue to prevail in Europe, where Italy is locking horns with the EU and a Brexit deal hangs in the balance, mega-economy Germany has just produced the worst growth in nearly six years. Even if Wall Street can successfully shake off noise from the Old Country, a fresh threat from falling oil prices, along with worries over trade and a Fed misstep may cast long shadows

EQUITIES - Currently equities don’t belong to anyone and it appears to be in no-man’s-land. Gold and silver are seeing a bit of support as the U.S. stock indexes have backed down and might fall further. Any stronger stock market selling pressure surfacing in the near future would likely more significantly benefit gold and silver prices.

What we see from the above explanations is that the markets are now moving focus from dollar to geopolitical events.

But one notable interesting thing we see coming in is from China. China has developed tremendously in recent years. But what’s next? Is the country entering the growth recession? And how it will affect the world and the gold market?

Indeed, at the turn of this century, China was a minor player in this market. While today it is both the world’s largest consumer and producer of gold, accounting for 23% of total gold demand and 13% of total gold supply. However, there are still opportunities for further development, as the investor base is too narrow, while the market infrastructure and regulations need to improve.

So far, the Chinese authorities have postponed the inevitable slowdown. But it will arrive one day. Given the economy’s massive leverage, the growth recession is likely to cause a financial crisis, which would hit the whole world. Gold should shine, then. The problem is that nobody knows when it will happen.

While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being.

Thursday, 15 November 2018

Investors mantra - Stay Calm

Gold has lost around $30/oz. in less than one week as the US dollar charge continues. Last week’s FOMC meeting confirmed that US interest rates will continue to climb this year and next, while the Democrats’ victory in the House of Representatives is being taken as a USD positive so far, as it makes US President Trump more accountable for his actions. The precious metal was also unable to pick up a risk-off bid after US and Asian stock markets crumbled overnight on tech - mainly due to Apple - and worries that US-China trade wars may escalate.



Apart from the above mentioned acts, the way things are going- default concerns and inflation expectations are rather low by historical standards. As a result, financial markets could take a hard hit if investors ever wake up and demand a higher price for accepting credit and/or inflation risk. Such a scenario could make holding gold a particularly interesting option.

The recent weakness in gold is not over. In fact, we are worried about another leg down getting underway. While some believe that gold is moving to the bears there are some players in the market who still believe that gold prices will rally in the near future. Long term investors and speculation are making a shift from a bear to a bull market. Their belief is strongly supported by a few factors which these market players expected to occur soon-


  • First and foremost, the current gold price does not seem to be high and there is a lot of scope for recovery till it reaches its all time high
  • In a risk-on scenario, there is a good chance that the gold price will move up
  • Bargain hunting and weakness in equities, such as the sharp fall in U.S. stock market on are helping put a floor under gold during the metal’s recent slide. The fact that gold has not fallen further “is probably due to the correction on the stock markets, which has made gold attractive as an alternative investment
  • Oiling of gold reserves is a clear indicator that central banks do not want to be dollar dependent. A gold driven economy will definitely raise the demand for the yellow metal and furthermore its prices.
  • Gold is the only financial asset that’s not simultaneously somebody else’s liability. Hence the liking for this metal always remains high.
  • With uncertain world financial assets, there’s an excellent chance there’s going to be a volatile markets and hopefully a one that favors gold.


Currently we see investors acting very calm in the market. Maybe they await a strong and concrete signal from the global markets to get back into action mode.



Tuesday, 13 November 2018

December likely to be more volatile

Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 earlier during the day.

Gold prices fell to their lowest in a week on Friday, and were set for their biggest weekly fall since August, on a firmer dollar as the U.S. Federal Reserve indicated they will continue to raise interest rates, lowering demand for bullion.

In the past fortnight we saw the dollar going week on the belief that losses for U.S. President Donald Trump's Republican Party in the midterm elections would make further fiscal stimulus measures unlikely.

But it didn’t take too long for the dollar to get back into action. The dollar has mounted a significant rally. Many reasons were cited for this bounce back-

The Fed kept interest rates steady on Thursday
It reaffirmed its monetary tightening stance.
Robust U.S. economy kept the currency underpinned
Investors positioned for a Federal Reserve interest rate rise next month
Political risks in Europe put pressure on the euro and the pound.
Fears about a no-deal Brexit gave dollar the push
Growing rift in Europe over Italy's budget
Reload of long dollar positions by investors
Vulnerability of European currencies
Weakening of the Euro over concerns about Rome's tussle with the European Commission over its 2019 budget
Weakness in Italy's banking sector
The melancholy in Europe has been good news for dollar
Easing of China-U.S. trade tensions
Weak China data
Weakening euro zone economy is expected to trigger further euro-selling pressure.


All these factors clubbed together strengthened the dollar and hence the dollar rallied to a 16-month high on Monday.

The dollar extended its recovery following a sigh of relief across markets after the U.S. midterm election results, and as investors turned their attention towards the Fed.

Gold has always been keeping a watch on the dollar and moving accordingly. Currently too it is dollar-watching and keeping an eye on the interest rate decisions. Gold has come under pressure because of a stronger dollar. Also the FOMC meeting showed no change in the interest rates. Gold might turn to the bears as any news that is positive for the U.S. dollar and the U.S economy as a whole will bring about a fall in the yellow metal and push prices down.

A lot is expected to happen by the end of year and these activities will sure create volatility on a global level. Ongoing trade disputes. Escalating Saudi- Arabian tensions and Brexit are all in line to occur. December is likely to be more volatile and hence a lot is expected to happen as we get closer to end the year.




Tuesday, 30 October 2018

Investors stockpile gold

Gold witnessed a series of events in the past week which ultimately proved fruitful for gold. Gold was highly influenced positively by a series of following key events:



  1. Globally, equities markets plunged down sharply.
  2. Uncertainties over the results of the U.S midterm, elections. At the moment there appears to be a strong chance of the Democrats gaining a majority in the House of Representatives, but the Republicans comfortably holding on to their Senate majority. Such a scenario would probably be gold-positive in that it would lead to political gridlock.
  3. Trade war between China and US which was initiated by the implementation of tariffs on Chinese goods by the US governments
  4. Uncertainty in Europe over the fallout from a possible no-deal scenario for Brexit, 
  5. Nervousness over the forthcoming Italian budget which threatens to challenge the Euro zone hierarchy 
  6. Geopolitical fallout from the Khasoggi murder which could upset Middle Eastern alliances.


Apart from the ones mentioned above, we still expect some geopolitical difficulties to occur, which may further strengthen gold and help it in breaking its comfort zone.

Gold has been back above $1,200 an ounce for the last two weeks, helped by safe-haven buying due to weakness in global equities and geopolitical tensions. Last week, Gold rose to test monthly highs near $1,240/oz but lost strength and pulled back. The retreat from the top, continued after the ECB meeting and during the American session, amid a stronger US dollar against majors and despite an improvement in risk appetite.

When the yellow metal crossed $1200 mark, it saw many investors retuning to the market with a great interest in gold. Retail buyers have started making their purchased as they expect a further price rise. Further, the investors’ class is also taking some stock profits as Wall Street volatility increased and they’re moving some of those profits to safer or more opportune areas, including gold and silver.

It’s not only the small investor class but also major central banks that are adopting gold. Russia and China have also been trying to win support from global governments to create a new gold-backed currency, thereby removing the US dollar as the world’s reserve currency.

Gold’s impressive performance of late, coming amid USD [U.S. dollar] strength, suggests that gold finally is behaving like a safe-haven asset.  There has been a pickup in gold purchases by central banks, including Hungary, Poland, India, Turkey and Mongolia, in addition to regular gold buyers Russia and Kazakhstan. And if this continues we will soon see gold at record highs.

Friday, 26 October 2018

Gold gains acceptance

Gold has time and again proved its worth. This time gold took long to do so, but it has finally gained acceptance. Once again gold has proved that it is one of those investment assets, that is capable of reducing portfolio risk and boosting returns in times of uncertainty.


Currently, looking at the geo-political environment, the benefits of gold will stand out further mainly for 3 given reasons-


  1. Other asset classes - gold has a low and sometimes negative correlation with other asset classes. For this reason alone, many institutional investors include a modest allocation to gold in their portfolio. Today, gold’s lack of correlation with conventional assets is particularly significant because markets are increasingly inter-connected and volatility is a persistent concern. Diversification into assets such as gold is widely accepted as a smart way to lessen risk.
  2. Alternate currency- gold can act as an alternative currency. A prolonged period of monetary easing has caused a sharp increase in money supply and reduced the value of fiat currencies. Over the past decade, for example, the US dollar, euro and RMB have depreciated sharply against gold. The dollar and the euro have more or less halved in value against gold since June 2007, while the RMB has fallen by around a third. One of the main reasons of stock piling gold is that that central banks and main financial want to reduce dollar dependency and instead store gold as an alternate currency.
  3. Zero Credit risk - gold has no credit risk. It does not compose an obligation of a government so it is not a liability. As such, ownership of allocated physical gold protects investors from credit risk, providing considerable comfort during times of crisis.


Now what lies in future for gold mainly depends on the strength of the dollar. Once the impact of the President Trump-initiated tariff wars, particularly those affecting Chinese imports, starts to impact U.S. domestic prices and margins, which they undoubtedly will, this could tip the U.S. economy into recession.  Should this happen equities markets would likely start to spiral downwards, the dollar’s strength would weaken again and this could all force the Fed’s hand.  It wouldn’t want to see the blame for any downturn movement in equity prices being attributed to its interest rate policy.  But that could be a reaction too late.  Past history seems to be littered with U.S. recessions following Fed tightening patterns.  Could we see this happening again?  If so the gold price, in U.S. dollars at least, could be a major beneficiary




Monday, 22 October 2018

Gold - once disowned ; now being adopted

After tentatively stabilizing in September, the gold price staged a $50/oz, rebound in early October, setting up the potential for a further short covering rally. 

Gold traded higher on Friday and is heading for the third straight weekly increase on the back of a rise of demand due to equity market volatility and a softer dollar. The market opened the day at 1229.70/1230.70. After the open, gold prices traded between a high level of 1230.46/1231.46

The gold in euro terms was trading at a three-month high near €1,070 per troy ounce. The conflict between Italy and the EU [European Union] over the Italian draft budget for 2019 is escalating.

The EU too seems to be taking a strong line against member states (Poland and Hungary are examples) which diverge politically from the consensus policies and rules. There is perhaps a fear here that the EU might break up if too many member states fall out with the EU hierarchy, which is probably why such a hard line is being taken on Brexit. A consensus deal is in both sides’ interests, but intransigence may well win the day, with adverse economic consequences for the U.K. and the EU as a whole.


Concerns that the euro-zone crisis could flare up again should support demand for gold as a safe haven.

Lately, US have been very aggressive in its trade policies and imposition of sanctions against countries like Russia and China. Indirectly the other counties that wish to trade with these sanctions hit economies will also suffer in the long run. They too will become victims of U.S. trade sanctions and imposed tariffs.

This is the main reason that countries like Russia and China have accelerated their gold reserves. Leading countries are trying to reduce dollar dependency, thus replacing it with gold.

The Russian central bank has announced yet another increase in its gold reserves in September – this time it has added a massive 1.2 million troy ounces (37.3 tonnes) to the gold in its Forex holdings. This brings the overall total to 65.5 million ounces (2,037.3 tonnes) and means it has added just short of 200 tonnes of gold to its reserves in the first 9 months of the current year which represents an increased acceleration in its reserve increases over the prior few years

The big European holders – Italy and France – in the global gold reserve table which respectively report holdings of 2,451.8 tonnes and 2,436 tonnes.

China on the other hand has been constantly increasing its reserves but not reporting to the IMF. It’s expected to be in the sixth place, but it could be higher given that the numbers are not reported to. The current trade war between the US and China has propelled China to reduce its dependence on dollar holdings in its reserves and perhaps use that money to buy more gold, but yes, without reporting it to the IMF.

Chinese officials and academics have intimated in the past that they would like to at least reduce the dollar’s dominant position in world trade and as a global reserve currency. It is already taking measures towards this by negotiating oil and other contracts in Yuan (convertible into gold if wanted) rather than in dollars, which is another reason why it may be building its gold reserves as well.
As we have mentioned before gold may be facing short term headwinds, but longer term prospects look to be ever increasingly positive.

The sentiment shift is still subtle, but it’s both real and widespread. After a few years of being ignored and/or dismissed as basically useless and almost being disowned by investors, gold is stable again, attracting positive press and increasing accumulation by big investors.

Thursday, 18 October 2018

Appetite for gold Rises

Gold prices have rebounded 3% this month to $1,225-$1,230/oz as the confluence of asset market unwinds and escalating geopolitical risks have come roaring to the fore.

A combination of factors ranging from depressed equity markets, trade disputes, global growth fears and geopolitical tensions have brought gold back into the limelight.

The yellow metal found comfort near three-month highs on Tuesday as risk-averse investors sought safety in the metal amid market uncertainty.


Thursday was a momentous day for the precious metals sector with gold and other índices, and giant gold ETF all breaking out on impressive volume, and this development was all the more extraordinary because it happened when the broad stock market was crashing.

The IMF Global Financial Stability report, released on 10 October, highlighted an increase in the level of risk among multiple global metrics. Following its publication, stocks in the US, Europe and Asia lost 4%, 3% and 4% respectively over three days which created a rally in gold.

This is viewed as a strong sign that instead of being dragged lower still by a crashing stock market, the precious metals sector will soar.

The positive link between global economic expansion and gold has, historically, provided an important contribution to its long-term performance. But its role as a diversifier and tail-risk hedge has been fundamental too, and its price has been boosted as markets have faced systemic risks.

While there have been headwinds for gold over the past six months, complacency has crept into the market, questioning liquidity; market valuations are at extreme levels; debt has grown substantially globally, and increased tightening could hurt markets. All these factors, either individually or in combination, could be catalysts for a risk-off environment that could propel gold higher.





Tuesday, 16 October 2018

Portfolio Allocation Towards Gold Increases

Lately there was a lot of discussion going around on the following issues- is it the time to buy gold? Will gold gain its safe haven appeal? Will investors continue to favour gold?

Well past few days gold gave all these answers. Since last Thursday gold has been in a positive mood, rising constantly and showing the hangover effects in the current week too.

Gold gained as global stock markets suffered from broad declines on Thursday. Major U.S. stock indexes headed lower Thursday, as well, failing to recover from Wednesday’s plunge.


Gold prices edged higher on Wednesday as some investors sought refuge in the precious metal after the global stocks tumbled and the U.S. dollar weakened. Spot gold rose 0.4 percent to $1,194.12 per ounce during late trading hours.

Continuing with the same behavior in the current week, Gold rose more than 1 percent on Monday to its highest in about 2-1/2 months as investors sought refuge in the metal after mounting tensions between Western powers and Saudi Arabia compounded jitters in global stock markets.

Spot gold was up 1 percent at $1,230.05 per ounce later in the day; having touched it’s highest since July 26 at $1,233.26.

There were varied reasons responsible behind gold gaining its glitter. Namely- 

Global Equities - Stocks on major world markets fell to a three-month low, with the benchmark S&P 500 stock index falling more than 3 percent, in its biggest one-day fall since February.  This created panic amongst investors.

Global stocks were under pressure, with European shares hitting 22-month lows on the back of a raft of factors including a U.S.-China trade dispute, rising tensions between Saudi Arabia and western powers, stalled Brexit negotiations and concerns over an economic slowdown in China.

Global Risks - the International Monetary Fund said last week that risks to the global financial system, which have risen over the past six months, could increase sharply if pressures in emerging markets escalate or global trade relations worsen.

Dollar - The U.S. dollar index retreated from a seven-week peak hit in the previous session. The dollar, a key driver for the precious metals, weakened against its currency rivals. Another haven market, however, U.S. Treasury bonds — chief among culprits influencing rickety stock trading of late — drew their own fresh demand Thursday, halting for now the rise in yields that spooked stock investors.

U.S. Stocks - Gold prices surged Thursday to the highest in more than two months, with the metal’s haven status in full force and attracting investment interest amid a sharp retreat for U.S. stocks that has infected foreign indexes

China's gold reserves - the markets were awaiting these figures post the Golden week holiday. Once the numbers were out, the market didn’t wait much to react. The official gold reserves in mainland China have grown from 1,054 tonnes in the first quarter of 2015 to 1,839 tonnes in the third quarter of 2016, to 1,843 tonnes in the second quarter of 2018. The demand for gold among Chinese consumers also rose by 5 per cent in the second quarter from a year ago to 144.9 tonnes. Demand by Indian consumers declined in the same period by 8 per cent to 147.9 tonnes.

The market for gold bars and coins has also been boosted by China and Iran, as they seek to hedge against geopolitical tensions with the United States.

We all know that the rate hike has strengthened the dollar against major basket of currencies. This fall in other currencies against the dollar has had an adverse effect on some of the Administration’s tariff impositions.  Some U.S. manufacturers are already warning that the tariffs on Chinese goods in particular will have an adverse impact on input and consumer prices. If equities are seen as likely to fall further this could see an increased move towards safe haven assets like gold and silver.

We don’t know how far gold will stay or stabilize here, but for the time being gold has definitely given us investment goals. And with the markets gold down, people have increased their allocation towards gold.


Monday, 8 October 2018

Think Positive

Whenever gold tries to move up, the market starts doubting its behaviour. The gold price did manage to end the past week above $1200 mark.

Gold prices rose on Friday following a monthly U.S. employment report falling to its lowest level in a year.



Spot gold rose 0.3 percent at $1,202.40 an ounce. It had gained 0.6 percent so far for the week, on track to mark its biggest weekly gain in six.

Data coming in from the US was responsible for this positive trend in the yellow metal-


  • Non farm payrolls rose just 134,000, well below Refinitiv estimates of 185,000 and the worst performance since September 2017 when a labor strike weighed on the numbers.
  • The unemployment rate fell two-tenths of a percentage point to 3.7 percent, the lowest since December 1969 and one-tenth of a percentage point below expectations.
  • Augusts’ initial count was revised up dramatically, from 201,000 to 270,000, while July's numbers came up as well, from 147,000 to 165,000.

  • The revisions bring the three-month average growth to 190,000 while the 12-month average gain is 201,000.


But the question once again was how far will it stay here? Will it move forward or once again it will turn down to its low of $1183?

Despite the weekly gain, gold prices have fallen more than 12 percent from a peak in April largely due to strength in the dollar, which has benefited from a vibrant U.S. economy, rising U.S. interest rates and fears of a global trade war.

The fear is that the rising dollar is going to cause a huge rout in the emerging markets and investors want to hedge that risk

Recently gold has been hovering between $1190 and $1210, not being able to cross these marks – neither upside nor downside.

The reason being- if there are 2 drivers for gold prices then on the other hand you would find 4 more factors are that ready to pull it down.
Currently some short term influencers are making it difficult for gold to amend its behaviors.

One of the strongest influencers for gold as of now is the US dollar and the US economy which are totally relative to each other.

Dollar has remained strong for quite some time. The US economy is also believed to be moving gradually on a positive growth path, which has further initiated the Fed to raise its interest rates in December. Moreover, it’s expected to bring in few more hikes in 2019 too.

What further raises interest is that the current trade war between US and Chine is acting positive for the US economy?

There has also been some settlement in terms of the rehashing of NAFTA as the USMCA (U.S., Mexico, and Canada Agreement which promises trade stability between the three North American nations, although when the small print is examined in detail it may leave the participants unhappy with the likely outcome.

Gold ETF saw huge withdrawals and equities markets displayed new records. All these clubbed together has been a big reason behind gold’s current behaviors. Even in this wary situation, some players are still holding positive sentiments for gold.

And one of the main reasons for this is central banks. Central banks across the world are hoarding gold amid growing fears about global volatility and a possible downturn for financial markets.
They have snapped up almost 275 tons of gold this year alone – 8 per cent ahead of 2017 – at a cost of more than £13 billion.

Many national banks have been returning to the market for the first time in years. India bought eight tons, its first purchase since 2009

Furthermore, if funds start moving back to the ETFs that would be a good sign that we could be at a turning point.

Gold believers have a strong faith in this safe haven asset and are waiting for it to rise in the long term as there are many positive things waiting to occur which will create a constructive impact on the yellow metal.

U.S. total debt and monthly deficit seems to be accelerating
Central bank gold buying appears to be increasing;
The dollar may be in the process of being downgraded as the world’s reserve
And precious metals demand appears to be rising in the key Asian and Middle Eastern markets

So gold is being pulled between the bears and the bulls of the short term and long term futures.

Much of the volatility will depend on the dollar and in case the dollar starts losing its global presence then gold price in the dollar terms is expected to rise,

Not forgetting the other geopolitical factors. Gold investors are very much positive for gold in the long run and believe that though it will hover around the $1200 mark for the time being, but will soon rise.

Friday, 28 September 2018

Investors continue to favour gold

I have been talking in a few of my previous blogs about the right time to buy gold. Should we jump into the wagon or should we wait. Every time the market feels that now we should consider gold, each time gold has been failing at proving its worth.

This week too gold showed some similar trends. The Fed on Wednesday lifted federal-funds rates for the third time this year, to a range between 2% and 2.25%, and signaled it was prepared to increase again in December


On Thursday, gold fell back below $1,190 to a six-week low. The precious metal is now on track for its sixth straight month of losses, its longest losing streak since 1989.

Spot gold has been a path to ruins on the back of the dollar's spike on market optimism over the impressive run of economic performances in the US economy, streaks ahead of its 'competitors' and the latest Durable Goods and in line GDP data gave the dollar a boost.

The release of the final U.S. gross domestic product for the second quarter “put downward pressure on the yellow metal. The pace at which the U.S economy is growing has been tagged as strong and was further validated by the comments coming in from the Federal Open Market Committee (FOMC).

The Fed balanced their hawkish statement by mentioning that the committee is a little less optimistic about the long-term future outlook and this part alone was enough to keep the dollar index in check and this was the reason that though gold slipped, the down fall wasn’t as severe as expected.

The reason why people are still favouring gold is that it hasn’t dropped that far. There are buyers for gold at $1180 also, because the bears have not moved underneath $1,150.

But does that mean a gold price rise is coming soon? Overall market watchers attending the show seem to agree that while an increase is coming it won’t necessarily be in the near term.

Monday, 17 September 2018

Is It Time To Go For Gold

Gold prices have tumbled in 2018, dropping, despite fears of a global trade war and turmoil in emerging-market economies. Such issues are risks that the market has mostly shrugged off, but the precious metal could be well positioned to provide some safety in the event those factors escalate and start to have a bigger impact on equities.

Gold is historically an asset class that does well during turbulent financial markets. As a safe-haven, the precious metal attracts risk-averse investors during such times. But when markets are doing fine, gold moves in a range, giving no gain for long periods of time.

But now many investors are rethinking on these lines and are shifting their focus on the yellow metal. Though gold has declined in the current year, lately it has shown dome positive developments.


Past week too gold was lying low till Thursday but gained momentum the following day. Gold prices slid on Thursday as investors purchased riskier assets instead of seeking a safe haven in gold, amid hopes for a new round of U.S.-China trade talks. Spot gold declined 0.3 percent to $1,202.30 per ounce during Thursdays trading hours, after earlier hitting its highest level since Aug. 28 at $1,212.49.

But after the economic numbers came in from U.S., gold prices gained rally.

Gold rose on Friday as the dollar faltered after softer-than-expected U.S. inflation data dimmed the case for a faster pace of policy tightening by the U.S. Federal Reserve, amid signs of movement in the Sino-U.S. trade standoff.  Spot gold was up 0.5 percent at $1,206.10 an ounce thus gaining 0.9 percent for the week. The main reason for this positive developments were-

U.S. consumer prices rose less than expected in August
Underlying inflation pressures also appeared to be slowing,
Suggesting the Federal Reserve’s pace of rate hikes could slow.
The data falling short of expectations, investors are thinking that the Fed may not go for a rate hike in December
The dollar’s index against a basket of six major currencies was a shade lower at 94.442 after slipping to a session low of 94.427, a bottom since July 31.
The months-long trade rift between Washington and Beijing has prompted investors to buy the U.S. dollar in the belief that the United States has less to lose from the dispute.

Now the current upward trend is propelling investors to once again make place for gold in their portfolio as it can be used tactically as a potential hedge for a stock market correction and/or a reversal in the dollar and real interest rates.  A reasonable 3 to 5 per cent of the portfolio can surely be allocated to gold.

It’s not only the investors, but leading banks and financial institutions that have also been adding up their gold reserves. Starting in 2008, central banks have been continuously adding gold to their reserves, though gradually and in relatively small amounts. In 2008 and 2009, such institutions added 580,000 and 210,000 ounces of the yellow metal (source- CPM data) and since then the reserves have been piling up, with around 11 million ounces getting purchased in 2017 and similar trend are expected this year too.

Russia too has been diversifying its monetary reserves. Most central banks are diversifying away from the dollar.

What’s even more interesting is that the RBI has bought 8.46 tonnes of gold in the financial year 2017-18. This was its very first purchase in almost nine pears. The last time RBI purchased gold was in Never 2009 when it has bought 200 tonne of yellow metal from the IMF.

Now currently domestic investors are thinking as to what to do with gold that has not given many gains in the last five years. Well the market experts believe that investors will be guided by expectations about where the Indian financial markets are headed and may give more though to gold in the coming months.

Though gold has not moved much over the past five years, some are still confused with the thought that with the current global trade wars and currencies dropping against the dollar is it time to go for gold?

Tuesday, 11 September 2018

Time To Add Gold In Your Portfolio

Gold has fallen more than 8% this year as concern about trade disputes; currency weakness in emerging markets and rising US interest rates has strengthened the dollar, making bullion more expensive for buyers with other currencies.


TRADE DISPUTE - Gold is trading back above $1,200/oz ahead of the expected announcement from the White House that China is about to get hit by additional tariffs on goods valued at up to $200 billion. The latest US trade balance for July showed the US in the red by $50.1 billion while the trade deficit with China rose to a fresh record of $36.8 billion.

Investors have been waiting for a fresh round to be fired in the Sino-U.S. trade war after a public comment period for proposed U.S. tariffs on a list of $200 billion worth of Chinese imports, which includes some consumer products, ended late last week.

With his domestic agenda being challenged by the upcoming midterm elections, less-than-flattering comments from White House insiders, and the ongoing Mueller investigation, President Trump is unlikely to step back from his fight with the Chinese.

The prospect of an escalated trade war continues to make matters worse for emerging market bonds, stocks and currencies.

The trade war and its effect on the USD/CNY exchange rate remains the primary determinant of Gold prices in dollar terms. Until either the trade war ends or the dollar falls, either of its own accord or due to a Fed reversal in policy, USD/CNY is likely to go higher and gold lower.

The escalating trade war crisis continued to spill its effect on gold in the past week too. Gold prices rose on Friday due to a lower dollar and jitters about an escalation in the U.S.-China trade dispute after fresh threats by President Donald Trump, although bullion is still heading for its fifth straight monthly decline.

Spot gold was up 0.6 percent at $1,206.19 an ounce during Fridays trading hours- a gain of 4 percent from the 19-month low of $1,159.96 hit on Aug. 16.



CURRENCY WEAKNESS - Lately positive U.S. economic numbers have been showing signs of a strengthening U.S economy. This has further strengthened the dollar against major basket of currencies. In India too rupee was at a record low of 72.17, sliding by 44 paise against the US dollar on rising demand from US dollars by bankers and importers.

Like the trade war, the dollar prices continued to show its effect on gold this week too.
The dollar traded higher against a basket of currencies on Monday amid fears of a potentially major escalation in the China-U.S. trade conflict, while Sweden's crown rose following the previous day's election.

U.S. President Donald Trump warned on Friday that he was ready to slap tariffs on virtually all Chinese imports into the United States, threatening duties on another $267 billion of goods in addition to the $200 billion already facing the risk of duties.

The index also found support after data showed U.S. jobs growth accelerated in August and wages notched their largest annual increase in more than nine years, boosting the prospect of faster interest rate rises by the Federal Reserve.

Non-Farm payrolls led to some modest downward pressure on gold. Furthermore, though the dollar will continue to weigh on gold, and as long as the dollar is strong, gold will remain constrained.

RISING INTEREST RATES - Gold prices held steady during Asian trade on Tuesday as investors remained on the sidelines amid expectations of a U.S. interest rate hike this month and on fears of an escalation in the Sino-U.S. trade war.

Strong U.S. payrolls data last week cemented expectations that the U.S. Federal Reserve will raise interest rates in September, in what would be its third hike this year, with expectations of one rise more in December.

Higher rates increase bond yields, making the non-yielding bullion less attractive and tend to boost the dollar.

Now what’s interesting to note is that though gold is being hammered lately, financial advisors in Asia, are suggesting their clients that this is the right time to include gold in their portfolio. They have been asking them to take advantage of dips and to stockpile to protect assets against pounding equity markets.

Gold has sold off over the past few months as USD interest rates have increased, so there is more opportunity to buy. For clients who do not have an allocation of gold in their portfolios, now is the time to add gold.

Wednesday, 5 September 2018

Gold might increase but with a lag

The yellow metal is down about 8 percent this year amid rising U.S. interest rates, trade disputes and the Turkish currency crisis, with investors parking their money in the dollar, which is being viewed as a safe-haven asset.

Firm U.S. dollar makes gold more expensive for holders of other currencies, with safe-haven demand for gold this year overshadowed by the metal’s relationship with the greenback
Gold's weakness in the international market is primarily on account of the US Federal Reserve's hawkish stance. It has hinted at four rate hikes this year and more next year. The US Fed is also shrinking its balance sheet.


On one hand the US Fed is raising rates and on the other hand central banks are doing completely opposite. This action is strengthening the dollar and hitting on gold.
An increase in rates is expected soon because the Fed believes that the US economy is strong enough to support a hike. This belief has led to an increased pressure on gold.

Following this sentiment, Gold prices edged down on Tuesday as the dollar hit a more-than-one-week high on the back of intensifying global trade tensions and economic worries in emerging markets.
Spot gold was down 0.3 percent at $1,196.90 an ounce during Tuesdays trading hours.

Many currencies world over have suffered setbacks against a strengthening dollar.

The dollar index, which measures the greenback against a basket of currencies, hit its highest since Aug. 24 at 95.410.

Now what will hold great importance for the dollar and the gold is the US economic data. Markets are closely watching the economic number, including a manufacturing survey on Tuesday and an employment report on Friday, which could influence gold’s moves this week as investors look for clues on the pace of U.S. interest rate increases.

Meanwhile, worries over an escalation in trade conflicts between the United States and other countries have kept participants in broader markets on the edge.

The threat of trade wars has only impacted currencies as of now. Analysts are expecting gold prices to start rising with a lag.

Currently we have been witnessing global economic crisis. This is making the other currencies weak and benefiting the dollar and time and again we have seen that any rise in dollar pulls down gold prices.

But if we see the domestic market, the gold dollar relationship is behaving in a very interesting manner.

Dollar and gold have an inverse relation so when the dollar strengthens, gold prices fall.

But when the dollar strengthens the rupee weakens, and a falling rupee offsets the fall in gold prices in India. So, while the price of gold may fall 7% in dollar terms, it may drop only 5% in rupee terms.
Any economic or political crisis results in an upsurge in gold prices and similar behavior as expected over the trade crisis between US and China. But it seems that gold’s rally has been totally offset by a strengthening dollar.

Analysts believe that gold could revive if the ongoing trade dispute between the US and China flares up into a full-fledged trade war. If the US economy suffers, gold would benefit from this.
Given the risks that exist today in the global economy, gold can prove to be a useful portfolio diversification tool and can help reduce overall portfolio risk.

Global inflation, rising interest rates, tightening of monetary policies by central banks, high crude prices are all positives for gold. 

Friday, 31 August 2018

Political Turmoil Expected to influence Gold

Gold turned negative on Tuesday as U.S. Treasuries rose after the United States and Mexico struck a trade deal, with analysts saying ongoing U.S.-China tensions would continue to weigh. Spot gold lost 0.4 percent to $1,206.39 per ounce during Tuesdays trading hours.

Following suit, Gold price fell on Thursday and is set to record a fifth monthly fall on expectations of a higher interest rate, while the dollar also edged lower.  Powell’s speech came after U.S. President Donald Trump said earlier this month that he was “not thrilled” about the Fed’s decision to hike rates. A potential hike in interest rates in general decreases demand for gold, which yields no interests.



Meanwhile, the U.S. reported on Wednesday the strongest growth of its second-quarter GDP in a decade, expanding at an annual rate of 4.2%.

Markets widely expect the Federal Reserve to hike interest rates in September and December following last week’s Jackson Hole symposium, where Fed’s chairman Jerome Powell defended policy of interest rate hikes, adding that he expected a low but gradual growth of interest rates as inflation is reaching the country’s 2% target.

On the other hand, metals investors are wondering if political turmoil could bring in volatility several for gold and silver prices.

Furthermore, what gained focus over the week were the recent prosecutions of prominent Trump campaign figures that now have Democrats giddy over the possibility of being handed grounds for impeachment. The chances for impeachment did get a boost, although it would seem to hinge primarily on whether the Republicans lose the House and Senate in November. It’s a very daunting political task. Only two presidents have ever been impeached – Andrew Johnson and Bill Clinton. Neither were convicted in the Senate and removed from office, however. That can only be done with a ⅔ majority vote.

If the threat of impeachment somehow becomes more credible based on the revelation of more serious crimes, then all bets are off. It will move markets. But, for now at least, it remains a long shot.

Major political turmoil is just one of many reasons to buy insurance in the form of gold and silver bullion. Investors can add upheaval in Washington to a longer list, which, at the moment, also includes:

Precious metals looking oversold.
Extremely bullish relative positioning of banks versus speculators in the Commitment of Traders data.

Monday, 27 August 2018

Time to Divert Our Attention Outside America

The precious metal is down 8% so far in 2018, and nearly 14% on an annualized basis - making it the worst-performing major asset class this year.

Gold has weakened this year alongside many emerging-market currencies because the dollar strengthened and US interest rates became more attractive. On August 13, gold fell below the key technical level of $1,200 an ounce for the first time since early 2017. It traded up 0.7% to $1,202.90 an ounce on Friday.

It may have gained by the end of the week, but it’s still a weak asset currently.  Spot gold was up one percent at $1,196.39 an ounce during Friday’s trading session, about 3 percent higher than last week’s 2018 low below $1,160.00.



Growing U.S. political uncertainty, reinforced by the legal woes of two of U.S. President Donald Trump’s former advisers this week, is keeping the dollar under pressure despite tighter U.S. monetary policy, analysts say.

By Friday, 27th August, gold prices saw a rally as investors took Powell’s speech as a more dovish stance, which seemed to rule out the need for a more aggressive tightening as he suggested a lack of inflationary pressure and put the warning for further gradual increases in interest rates on a continuation of current economic strength and a strong labor market.

In his speech, Powell indicated that there was no clear sign of an acceleration above the Fed’s 2% inflation objective and said there did not seem to be an elevated risk of the economy overheating.

Gold prices traded higher on Friday as Federal Reserve chairman Jerome Powell emphasized the central bank’s plans for gradual interest rate hikes would be conditioned on the continued strength of the U.S. economy and labor market.

Higher interest rates tend to weigh on demand for gold, which doesn’t bear interest, in favour of yield-bearing investments. The remarks also weighed on the dollar, extending the greenback’s losses and increasing the demand of the precious metal for holders of foreign currencies.
As the most recent FOMC statement indicates, if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate.

Gold is usually favoured as a safe haven during market turmoil, but even all the back and forth on trade between the US and China has not stirred up a bid for the metal as the dollar still hold strong.
The commodities market has been adversely impacted by the strong dollar and the discussion of a trade war possibility, which may already be happening. With the economies of America, Europe and Asia picking up, most investors are asking, why buy gold or silver? The dollar is the key. When it starts dropping, we will see the price of gold, silver and all commodities improve.

Many foreign governments and companies have borrowed in dollars, thinking the dollar will go lower relative to their own currencies. But the dollar has done the complete opposite. So now, these borrowers of $US are being squeezed as their borrowing costs have risen dramatically. This is creating financial distress in certain corners of the world. At these locations the price of gold will be seen climbing quickly.

But when will this happen? Will the dollar weaken? When will we see the gold prices going up? Will global uncertainties rise? There are many questions floating in the market currently.
And hence we all need to divert our attention to some of the developing problems that exist outside America and how it will impact America and furthermore the dollar.



Thursday, 23 August 2018

Winds of change for Gold

Though gold has not performed as per expectations, we saw it glittering once again by the end of the previous week.

Friday saw the gold price pick up significantly to end at over $1,180 after spending much of the period in the low $1,170s, but the rise was almost all due to a turnaround in the U.S. dollar index which slipped back a little.

Dollar was going weak in the first quarter of 2018.This led to a rise in gold prices which reached above $1350 in April. There were positive sentiments for the yellow metal and traders expected it to cross $1400. 


But from mid April, with the rhetoric around the Trump trade tariff impositions taking centre stage, it all turned around. The dollar started to strengthen and the gold price, along with most other metal and mineral commodities priced in U.S. dollars, began to slip accordingly. As the tariff impositions moved from conjecture (many thought President Trump might be bluffing) to reality and counter measures were threatened and put in place by affected nations, the dollar started to rise and has not really looked back apart from the odd stutter since.

The same sentiment was witnessed in the past week. On 13 August 2018, the price of gold fell below 1.200 USD/oz, declining to a 1.5 year low. There are many factors that have triggered this down fall.
Even thought gold jumped up on Friday, the yellow metal is around $170 down on its peak earlier in the year. That’s over 9% down on the year to date and over 12% down from its peak.


Let’s have a look at the key influential factors-

Demand for US Dollar - Given recent market uncertainty – amongst other things due to the Turkish Lira crisis and other emerging market currencies being affected by the turmoil – investors have substantially increased their demand for the Greenback. It does not only serve as a "safe haven" currency, but it also offers a positive interest rate (e.g. 2-year US bills offering a yield of around 2.6 per cent). In the international context, this is a rather attractive combination from an investor's point of view. What follows is an appreciating US dollar and – as its flipside – a decline in the price of gold in US dollar terms.

Fed Rate Hike - the Fed's hiking cycle might be closer than the market expects. The reason lies in the growing international US dollar indebtedness. In the period of extreme low US interest rates, many foreign borrowers – in particular, those from emerging market economies – have taken on US dollar denominated debt. An appreciating US dollar causes them quite some trouble: It increases the costs of serving their debt. What is more, it makes rolling-over maturing US dollar debt more difficult: Lenders become hesitant to renew loans, and if they do, they can be expected to charge higher interest rates

Dependence on U.S Economy - Due to the high dependence of many economies around the globe on the US dollar, the Fed can no longer gear its monetary policy to the needs of the US economy alone. It can no longer ignore the consequences its monetary policy is most likely to have on other economies around the world. While the US economy may well need higher interest rates, many countries will have significant problems coping with US borrowing costs going up. As soon as the financial markets find out that the Fed cannot continue its US economy-centred monetary policy, there is a decent chance that the reserve currency status of the US dollar will be critically reviewed. So there is quite a possibility that the currently unshakable belief in the Greenback's safe-haven status will lose some of its shine.

But we can surely say one thing - The wind of change is definitely in the air for gold prices
After the Labor Day holiday in the U.S. in the first week in September things could start to change though as perhaps some of the trade war rhetoric will cool, China will come back to the negotiating table and the dollar index may ease giving gold some welcome respite.

Physical demand is coming back, which is a great sign for prices in the second half of the year.  Lower gold prices are starting to stimulate better physical demand, particularly from India. This might lead to rally in gold prices in the near future.

Tuesday, 14 August 2018

Gold being pulled between bulls and bears

Lately, gold has shown a typically consistent price pattern. It has witnessed a lot of pull and push in the trade range. It generally starts on a negative note, recovers and is pulled down again. So it’s a wave like movement, which leaves the markets perplexed over its behavior.

It’s difficult for market players to project or analyse the markets for gold- whether it’s bullish or bearish. This has been going on for quite some days now. As gold moves up and the market expects it to cross the key levels. Something contradictory happens and the yellow metal starts trading negative again.


The classic example of this would be the recent Federal Open Market Committee meeting on July 31/August 1.

 The U.S. Fed chair Jerome Powell’s statement on the U.S. economy and likely Fed interest rate policy for the remainder of the year strengthened the dollar and pushed gold’s trading range back around $20.

When the data released was not par expectations, gold did manage to trade high, but then was pulled down over rate hike expectations.

So right now the market is divided in to groups. This that want the yellow metal to fall below $1200 and those that would like gold to strengthen and cross $1400. So there is a kinda tug of war between the $1200- $1400 trade range.

In the short, probably in the coming month gold looks negative. It might be down. But is soon expected to gain momentum as we the onset of the festive season in India which will mark a rise in demand for gold. Apart from this, equities look weak and markets might shift to gold as an alternative investment.

One more important thing that will contribute to these rising prices is bitcoins. After the much hype surrounding this investment option, it’s not being welcomes by the parties that are suspicious about its future.

Coming to our main point of discussion, Will gold stick to the bears market or is it expected to enter the bulls. Well it depends on the following factors-

Markets returning to trade after U.S. Labor Day Holiday
Dollar
Chinese import tariffs laid by the U.S and reaction/actions of the Chinese government
U.S inflation
Fed policies
ECB
Russia’s market volatility

Gold, too, has historically had a role as a haven asset in times of global market turbulence. Now, Financial markets continue to watch for any evidence that might knock the Fed off its projected path to raise interest rates twice more this year and three times next year. Apart from that any global uncertainty is expected will be welcomed by the bull supporters for gold. Markets also await the onset of the festive season in India, which will see a rise in the demand for the yellow and thus push up gold prices further. So currently along with the US economy happenings, a lot of global factors will also play a key role in influencing gold prices. Any sudden event can boost the yellow metal high towards the end of 2018.



Tuesday, 7 August 2018

Gold expected to end the year on a positive note

Spot gold, which is down over 6 per cent this year, is close to a one-year low of $1,211.08 touched on July 19 as the dollar powered to a one-year high on expectations of higher US interest rates this year.


Gold's appeal has been fading this year with prices sliding near to the key US$1,200 level, partly because of an upbeat outlook on the US economy that's strengthened the dollar.

Gold prices were higher on Friday, after disappointing jobs data pushed the U.S. dollar lower but still remained near two-week lows. A stronger dollar and rising interest rates have weighed on gold in recent months.

Gold prices are seeing just modest gains in the aftermath of a U.S. non-farm jobs number that did not meet market expectations.

The U.S. employment report for July showed –
A significantly lower-than-expected non-farm payrolls rise of 157,000 jobs. The number was forecast at up 190,000, but after
Wednesday’s ADP national employment report for July that showed a rise of 219,000, many were looking for a non-farm jobs number north of 200,000.

Markets believe that U.S economy is on its path of gradual progress and hence they didn’t react much to these numbers. One more reason for less volatility could be the vacation season in U.S and Europe that continue to keep the, markets calm until U.S. Labour Day holiday.

Even though these numbers were below expectations, it did strengthen the Federal Reserve action to gradually increase interest rates.

The Fed left interest rates unchanged on Wednesday, as expected, but pointed to the potential for increased rate hikes due to strong U.S. economic data.

Higher rates are a negative for gold as the precious metal, which does not pay interest, struggles to compete with yield-bearing assets when rates rise.

Furthermore, the metal saw some relief on Friday as U.S. hiring cooled in July and China moved to support its currency.

But markets are now positive towards gold. Many analysts believe that we are already at the bottom of this cycle for gold, and they believe that gold prices will pull up from here in the next 6 months.
Reasons being-

Trade War- the US and China imposed import tariffs on each other, fraying nerves on financial markets. A further escalation in the trade war crisis will definitely push up gold prices.

Demand- After a slow season in Mat, gold is all set to run higher during the coming 6 months over rise in its demand.


The above chart shows what happened towards the end of each of the past five years, as Chinese and Indians loaded up on gold for Spring/Summer wedding gifts and as savings for post-harvest cash. There’s no reason to expect them behave differently next time around.

Dollar dependency-  the analyst are convinced that gold will continue to grow in value relative to currencies, particularly as more states seek to rid themselves of their dollar holdings.

Gold Holdings- According to the latest estimates, Russia and China are in 5th and 6th place in total gold holdings, respectively.  The US is estimated to have over 8,100 tons of gold. Germany, which recently repatriated its gold from the US, is in second place, with 3,371 tons; Italy is in third with 2,452 tons, and France in fourth with 2,436 tons. Moscow's historical record in total gold reserves was reached in 1941, when the USSR stockpiled some 2,800 tons of gold just before the start of the Second World War.

Looking at the above mentioned events, we think that gold is expected to bounce back from its year lows and wil head positive towards the year end.